We will now begin the 2023 Third Quarter Earnings Release Conference Call of POSCO Holdings. As for today's conference call, after the presentation of POSCO Holdings, we will have a Q&A session with the participants. [Operator Instructions] Now we will start the call..

Good afternoon, ladies and gentlemen. I am Jeong Ki-Seop, CSO of POSCO Holdings. First and foremost, I would like to extend my gratitude to all the investors and shareholders for your keen interest in POSCO Holdings.

In Q3, we saw increasing global geopolitical tensions as well as persisting worldwide economic slowdown due to the high interest rate policy initiated by the U.S., which resulted in further uncertainties to the business environment.

Amidst the ongoing economic slowdown and rising costs due to inflation, there were many challenges in business operations. However, through proactive pricing adjustments and cost-cutting efforts, we achieved a consolidated revenue of KRW18.9 trillion and operating profit of KRW1.1962 trillion.

In particular, our steel business generated robust profits through improved product mix, lower raw material costs and cost-cutting efforts, despite a drop in selling prices due to deteriorating market conditions, a decrease in product output resulting from major equipment repairs.

Such performance underscores that our group's global competitiveness and efficiency in the steel sector continue to be a significant foundation for sustaining profits and cash generation, even in challenging economic conditions. The secondary battery materials business is now in its initial phase, as production facilities are being completed.

At this stage, what is crucial is consistent and ongoing investment based on a long-term strategy. With regards to the market changes such as IRA, emergency, LFP battery and changes in the price of materials, we will be closely monitoring and partially supplementing the strategy if necessary and when there is a need.

However, for the most part, investment has been made based on the quantities ordered in the mid to long term until 2030 and thus, the target to build a global market position in the growing market and to solidly secure a market position through rapid investment will not change.

For several years, POSCO Group has continuously improved the financial structure and despite investment being made in the gross business, the 3Q debt-to-equity ratio only amounted to 13.7%. Such sound financials and solid profitability in the steel part will become a foundation that allows the growth strategy to be pursued without faltering.

In the fourth quarter as well, it seems difficult to predict the short-term economic recovery.

In line with such a difficult business environment, our company will first make continuous efforts to secure short to mid-term profitability and secondly, keenly allocate investment resources so that we can strive for unwavering growth strategy that raises the long-term corporate value of POSCO Holdings.

From now on, head of the IR team will provide details on the third quarter earnings..

Good afternoon, ladies and gentlemen. I will now provide an overview of a performance in Q3 2023. In Q3, POSCO Holdings recorded a consolidated revenue of KRW18.961 trillion, a 5.8% decrease compared to the previous quarter, and an operating profit of KRW1.196 trillion, 89.8% decreased Q-o-Q.

Despite the sluggish economic conditions, the sale profit was resilient at around KRW852.7 billion and the green infrastructure sector also generated over KRW400 billion in profit, similar to the previous quarter.

In Q3, we invested a total of KRW1.9 trillion on a consolidated business basis, bringing our cumulative annual investment to KRW5.6 trillion. Let me elaborate on each business. First, in the steel sector, after incurring losses in Q4 last year, we turned a profit of KRW338.1 billion in Q1 and recorded an OP of KRW1 trillion in Q2.

However, in Q3, the profit size slightly decreased to KRW852.7 billion. As mentioned during the Q2 earnings call, [indiscernible] bottomed out in January of this year and began to rise. However, despite the reopening of China's economy, the pace of economic recovery has been slower than expected.

And as a result, since June onwards, our prices started to decline again, and this trend continued until September. Since September, there has been a movement towards steel price increase in many countries, including Korea, but given the high level of economic uncertainty, no distinct results are currently evident.

But POSCO, with a high proportion of long-term contracts, exhibited a relatively stable performance. Second is the green infrastructure sector. Both revenue and operating profit decreased by 9% and 7% respectively compared to the previous quarter.

Taking into account seasonality, operating profit grew by 19.9% year-on-year resulting in profits of over KRW400 billion for two consecutive quarters. Last but not least, our green materials revenue jumped 10% to a few again and posted a record quarterly revenue, but still it incurred losses.

In particular, POSCO Future M's are OP contracted due to margin pressure caused by the decline in prices of key raw materials such as lithium. Initial OpEx and newly established subsidiaries like POSCO Argentina and POSCO Lithium Solution have also added to the losses.

As the construction of these newly established subsidiaries enters into final stages, it is anticipated that these costs or cost burdens will persist for the foreseeable future. Next, I would like to move on and brief you on major business activities in Q3.

First, I would like to provide an update on the progress of the construction of secondary battery material plants. The completion of POSCO Pure Battery Lithium Solutions, Lithium Ore, POSCO Types line has been delayed from October to November this year. And the commercialized completion has been rescheduled from February to April next year.

POSCO high purity nickel refining plant construction has also experienced a delay of approximately one or two months pushing the originally planned December completion into Q1 next year.

As you probably learned through news reports, there was a labor dispute involving the [indiscernible] Construction Labor Union, which started in early July and lasted longer than expected, eventually coming to an end at the end of September and as a result of the construction projects on the way in the [indiscernible] area experienced some delays but they are now back on track.

Again, other than one or two months delay, everything is back on track. Other projects are proceeding as originally planned. POSCO Argentina's lithium plant Phase 1 is scheduled to be completed in Q2 2024 and the completion schedule for POSCO lithium solutions brine lithium plant Phase 2 in Q2 2025 remains unchanged.

There are two plans that are newly programmed. The first one is POSCO Silicon Solution, Pohang plant which aims to produce silicon oxide, silicon anode materials. Construction for this facility commenced in June. The MEP work is progressing faster than anticipated and is scheduled for completion in Q2 of 2024.

Secondly, the nickel smelting project in Indonesia commenced construction in September and it is scheduled for completion in Q4 of 2024. Next page, second is [indiscernible] Pohang and automobile steel sheet manufacturing JV between POSCO and China's HBIS has completed the construction of number one galvanizing plant.

The JV has added an additional galvanizing plant to strengthen its presence in China, the largest auto steel sheet market. Plan number two will be completed in May next year.

The plan is to incorporate the existing Guangdong Pohang Corporation with a production capacity of 450,000 tons into the JV to equip it with an annual production capacity of 1.35 million tons in China in the future. Raw materials including cold-rolled steel sheet will be supplied jointly by POSCO and HBIS.

Under its made in China 2025 policy and green car industry development plan, China is experiencing a higher growth of local green car production compared to internal combustion engine vehicles. Also automotive components and materials are also transitioning from conventional cold rolled steel to zinc plated steel. Next page.

POSCO Mobility Solutions constructed the EV motor core plant in Mexico. As explained in the previous quarter, POSCO is producing electrical steel and hyper-NO of globally competitive quality and on November of this year, 150,000 ton capacity was expanded with a plan for additional expansion of 150,000 in the fourth quarter of next year.

Based on such high quality steel materials, POSCO Mobility Solutions used the electrical steel to produce EV motor core to be supplied to Hyundai Motor Group in most parts now.

Since November 2022, you can see from the disclosure the total order volume signed with Hyundai Motor Group as a long-term motor core supply contract amounts to KRW10.3 million.

In Mexico, a production base that has the motor core capacity to be installed and 1.5 million was completed and with this we can now supply to North American automobile companies including Hyundai Motor Group.

This plant already secured most of the order quantity and we believe that this is the perfect example that RELL represents the value chain competitiveness that our group has on the eco-friendly green automobile material supplier. Next will be the details of the earnings for each of the company.

First, page 9 will be about POSCO, the production volume of POSCO products decreased by 100,000 as compared to the previous quarter due to the plant repair of Pohang Steel Plate two plant and [indiscernible] Hot Road three plant.

As such, the sales volume also dropped by 52,000 tons, but with the increase in the sales of high value added WTP product, it helped to defend the profitability. Next page will show the P&L. Operating profit of POSCO record is KRW727 billion, which is KRW114 billion lower than the previous quarter.

The largest reason in the reduction is the drop in the sales price. During 3Q, the sales price dropped by approximately KRW48,000 per ton as compared to the previous quarter.

The net drop in the unit price compared against the same product was KRW53,000 per ton, and this can be considered to have been partially recovered with the increase in sales of high value added product. Despite the drop in raw material cost in the third quarter, the price drop was quicker, leading to a decrease in mill margins.

And that is the circumstances that we're facing. Recently, coking coal price is on the rise. This is because with production issues in key supplying countries, the supply volume has now recovered to a level before 2020, and amidst this, solid demand has continued centering on India and Indonesia.

Based on such a burden on raw material, [indiscernible] increased the price for three months in a row from August to October, and global steel companies are recently also making attempts to raise price. POSCO also slightly increased the price of hot rolled steel in September.

However, with sluggish demand and uncertainty of the global economy, the impact of the price increase has not shown yet, and there are also still difficulties in carrying out negotiations for the price increase.

As for the price of steel that once again dropped to the level of the start of the year, considering various factors such as the raw materials and the P&L circumstances of the Chinese competitor, it seems unlikely for the price to drop further.

However, confidence for recovery is also weak and thus currently POSCO is doing its utmost to carry out various activities such as product mix and cost reduction activities to defend the profit as much as possible. And that's why such a difficult environment, we're expecting it to be possible to a certain extent in the fourth quarter.

Next will be page 11. P&L of overseas steel was impacted more by the market condition than POSCO. As for sales price of [indiscernible], sales price dropped by 9% Q-o-Q and it dropped by 6% for [indiscernible] and 1% for PCSS. Even in such a market condition from the structural side, efforts were made to enhance the profit structure.

In Indonesia, domestic sales with higher profitability is being expanded and domestic sales cost rose to 73% in 3Q. In India, sales share for automobile rose to as much as 50.2%. That's a decrease for PCSS and this is because the drop in raw material price such as ferro nickel price was reflected. Next is POSCO International.

Operating profit decreased by 12.9% quarter-on-quarter. More than half of profit reduction was from the steel trading part following the drop in steel price and sales volume. As for energy with the increase in the sales volume of Myanmar's gas field and the rise in power generation profit demonstrated a sound profit generation capability.

Next is POSCO E&C. Revenue decreased against previous quarter, but as a result of cost reduction efforts and so forth, operating profit increased slightly. So we were able to see no big issues here, and new orders decreased to KRW2.1 trillion in third quarter.

Plant is being strategically expanded and therefore this one increased, but as for the housing part, there was a decrease in the construction order amounting to KRW1.1 trillion. POSCO Future M is growing steadily.

Despite the drop in the [indiscernible] price, sales volume continued to grow to record a revenue of KRW1.286 trillion, which is 7.8% increased quarter-on-quarter. This is because N86 products' autumn revenue started to contribute in earnest. The share of high price N86 sales rose from 31% in second quarter to 40% in third quarter.

However, with the drop in the lithium and nickel price, average sales price dropped and due to time differences in the price drop of products and raw materials and other unprecedented uncertainties in the raw material price, there was a pressure on margin. This was a brief earnings release of the POSCO Holdings. We will now move straight into Q&A.

Thank you..

We will now have Q&A session. [Operator Instructions] The first question is from Hyundai Motor Security [indiscernible]. Please go ahead..

Hello. My name is [indiscernible]. Thank you very much for giving me this opportunity to ask you questions. I have three questions altogether. First of all, recently we have China real estate policy. But despite the positive policies, I don't think that the economic recovery outlook is that positive.

So Q4, and also next year, how do you foresee the sale market? I'd like to ask for your opinion. And second question, in the same line, if you were to auto, I think that in the latter half you will have some ASP increase.

However, for households and for other purposes, what is your forecast for ASP? And my final question has to do with the cell making capabilities. I think that in the long term the capability will increase.

Overseas production capabilities, what would that be in the future? And also, HyREX, will they be producing using HyREX technologies going forward? Thank you..

Thank you very much for your questions. From POSCO Marketing, we have Mr. [indiscernible] he is going to take your questions..

Hello, my name is [indiscernible] group leader of Marketing Strategy Office. With regard to China real estate policy. As you probably know, in September, Chinese government introduced a policy to boost its real estate market.

Even if you have some properties acquired in the past, if you're purchasing housing today, then you're going to be acknowledged as first time buyer and will be receiving a lot of incentives. And at that time, real estate transactions did increase. However, if you look at the current state, yes, it is climbing upward.

However, I don't think that it's that significant to affect the overall Chinese economy. And with regard to Q4 steel market outlook and for housing also shipbuilding, you've also asked for ASP. Well, basically this year for 2023, our market outlook was that in the first half it's going to be quite active.

In Q2, we thought that it's going to go up, and also starting from Q3, it's going to turn weak. And Q4, we thought that the weakness will continue. So we stand by that production.

China's production reduction, which we expected is not really materializing because of the Chinese government's policy and also the business deterioration, the production reduction didn't really take place. So I think that Q4 market outlook is going to stay weak just like Q3.

And also ASPs for different industries, for auto, in the letter F compared to the first half, because of the voluntary costs and fuel costs, we did finish discussing the ASPs and for shipbuilding, the shipbuilding industry overall is quite positive. However, we have yet to conclude ASP discussions.

For home appliances or housing, the market outlook is not that good and so we're going to maintain the [indiscernible] priced. Thank you..

For overseas capacity increase, allow me to make some comments. POSCO does have upstream production. We have about 5 million tons capacity. And if you look at our long-term policy or strategy, 14 to about 9 million tons addition is going to be made in the future.

But as you probably know, we have India and Indonesia and the US where we plan to make investments. So we've got to higher it so we do have a demo plant rather in 2026 and 2027 is going to be operating and for [indiscernible] plant, I think that we will be able to have it up and running beyond 2030.

So our mid to long term overseas capacity addition plan is that the traditional arc furnace or electric arc furnace is going to be used. The HyREX, again, I think that we have to wait until past 2030. Again, we are trying to focus on the capacity increases in India and also Indonesia.

In the case of Indonesia, if you look at carbon neutrality, the target is 2060, and in India, it's 2070. And so, if you look at its countries, upstream steel making, we have steel arc furnace, the traditional ways of making steel. Thank you..

Next question will be Mr. Kim Sang-hoon from HI Investment Securities. Go ahead..

So I am Kim Sang-hoon from the HI Investment & Securities. I have three questions. First is the following. So right now we see that raw material is quite strong and I was wondering about the future prospects and I am not seeing investment. So I'm wondering are we seeing an under-evaluated area becoming strong or not.

So there were some questions about it so I want to ask you for your forecast. And second is about the lithium and as for the battery materials we are seeing a decrease in price, so I want to ask for your view on the future forecast. And in the value day, you also talked about some earnings release.

I was wondering were there any changes from the earnings that you discussed during the value days as compared to now? And right now, [indiscernible] so as compared to other steel companies, do we have any things that we can differentiate against them like OEE or something like that? So if we do have any questions, please let us know..

So let me first answer the question about the raw materials. Actually, we will have Mr. [indiscernible] from raw materials office two answering the question. So head of raw materials office one will be answering the first question.

And the second one, we will have the head of lithium battery materials business, [indiscernible] And as for the hydrogen and ethanol we will have the head of steel business [indiscernible] answering the question..

So I am head of raw materials office [indiscernible] so I think you all experienced the coke and coal experience in the second quarter so we are seeing stronger coke and coal for the following reason. So in Canada and Australia we have seen a decrease in the labor power and there was a strike in the Australia mine. So this caused some problems.

So the supply volume decreased as compared to 2020. However, in terms of demand, India's ore mines actually increased and expanded. We are also seeing the [indiscernible] plant being operated in India. We were seeing a solid demand and that's why we saw an increase. However, when you do look at the future forecast, there is the ESG issue.

So for the time being, additional investment will not be easy. And that is the common opinion across the industry. And as for demand as well, we also have ESG in line. Therefore, there is no big factor for an increase there.

That means that next year or the year after, for a year or two, as compared to demand, there could be a slight shortage of the supply, about 1 million to 2 million.

And as for the price, it could be maintained or there could be a slight increase, so there is a possibility like that, but in the long term, we don't expect the price to increase by large because there are no factors. And as for POSCO as well, in line with the carbon neutrality roadmap, we are seeing a decrease in demand as well.

And we are saying that there will be no issues in getting the supply from our coking coal mines..

And I am head of the lithium battery material business, [indiscernible]. And as for the cooking coal and the lithium-nickel battery prices, we have seen a decrease in the price. And you also asked about the future business areas. Recently, with the secondary battery metros, we have seen a drop in price as compared to the previous year.

So last year, the price actually there was an irrational price because we could not meet the demand. So it actually increased irrationally as of last year. And when we look at the companies in the industry and when you are focusing on Chinese companies, we saw a drop in the price.

So I think we heard that we are going back to the pace where we are going to a rational price. And after the third quarter, the EV demand is facing a short-term adjustment as well. And this was also said in the media a while ago as for the economic downturn in Europe. And with the electrification, there will be a short-term adjustment.

And against this backdrop, companies like Volkswagen will see the sales volume decreasing as compared to their plan. And until the end of this year and until the beginning of next year, there could be an impact and there were opinions saying that. And as for the price of the raw materials and the lithium and nickel, it will have to meet the demand.

And as for the lithium price, it is around KRW23,000 and as for the nickel price, it is around KRW18.5K. And right now [indiscernible] Markets forecast. In 2030 the lithium price is expected to be between $25,000 to $35,000 dollars. So the forecast has dropped by around $5,000 as compared to the first half.

So in the July IR we have actually expected it to be around $30,000. However, for the short-term price, it is still written as around $35,000 to $40,000. However, we are seeing some adjustment in the market, but it is a bit lower than expected. So we are expecting there to be a restructuring of the prices in the market soon.

And as for our business areas, In the mid to long-term plan, we are not that far off from that $30,000 that we expected. And as for our revenue, especially for -- even if there is a drop in the lithium price, we are going to see a drop in the unit price as well.

And as for the -- because there will be a drop in the lithium ore price as well, we are seeing that it will be pretty stable for us and that will be all..

So let me give my opinion about the hydrogen reduction steel. As for the hydrogen reduction steel, the HyREX, we don't really have a right answer to it. However, when you see the regions like Europe, Japan, and Korea, there are different approaches to the HyREX. As for Europe, it uses the shaft method and then adds the pellets to reduce the hydrogen.

And this has to use the high grade pellets. And as for our full use of the method, we can actually use the powder pellet so that has an advantage there. And the method used in Japan is to put hydrogen into the furnace and to go into CCU. However, there are some skepticisms as for CCU being possible or not.

And this is also related to the economic situations. Right now in each of the regions, mills are developing their own approaches and technology.

And as for the HyREX and the fluidized reduction furnace method that we are working on, this is something that the promising steel companies are also interested and we are also carrying out technological cooperation.

So as for the fluidized reduction furnace method, we believe that this is a competitive method for us and therefore we are continuing to drive it forward. But for the shaft method that is being used in Europe now, we are monitoring the technology and if necessary, we're going to ensure that it is applied.

So we are currently monitoring many different technologies and if they can be applied, we will try to work it out..

Next question is from [Hana] (ph) Securities, we have Mr. [indiscernible]. You have the floor..

Yes, thank you very much. I'm from Hana Securities. Thank you very much. I also have three questions. First of all, the lithium price. You did comment on it already, but if you look at your previous projections, $25,000 to $35,000 price range, you mentioned that it's going to be somewhere similar.

However, what we worry about is that compared to the current price, the lithium price could go down or [indiscernible] even further. So that is the market concern. So do you have such an expectation? Do you see that the price could plummet that much? And also, you see them and also the U.S.

carbon emission-related penalties and trade barriers, applications. With regard to those, I think that they will be implemented starting from 2026 if that is the case. Then, like Article 32 Trade Act of the U.S. And also additional safeguards from the U.S. for steel. Against those measures, I think that -- do you think that the U.S.

and also EU will lift their regulations? And finally, if you look at the latest media reports with regard to POSCO, we hear a lot about labor strikes.

So can you provide us with some updates about that issue?.

Yes, thank you very much. With regard to lithium price, I would like to invite Mr. [indiscernible] head of lithium battery materials business to answer. And [indiscernible] and also trade regulations and carbon emissions related issues, I would like to invite Mr. [indiscernible] head of International Trade Affairs Office to answer.

And with regard to labor strikes, I would like to ask Mr. [indiscernible] head of Finance Office to answer..

Yes, thank you very much. I would like to take the first question about lithium battery materials, lithium battery prices or lithium prices. Now if you look at Chinese OEMs and procurement sites, what is the adequate level of the lithium price? That was the question. And the answer from OEM was that, it's around $25,000 to $35,000 per ton.

The answer was that from EV's point of view, that price range is acceptable. And in reality, if you look at lithium industry $20,000 or if the price goes below $20,000, then new mine development is going to be delayed. So that is the overall comment. So again, currently the price is about $22,000, $23,000 per ton.

Now if the price goes further down to $20,000, I think that is going to be the rock bottom. Then if I think that -- if we can't have a prepared yield, I think that that price range is going to stay for an extended period of time.

In the past, back in 2019, the lithium price was below $10,000 or just about $10,000, but it's not feasible anymore because at that point in time that lithium came from South Lake, lithium, the amount was really limited. Brine lithium was the type of lithium and the cost was actually very low.

However, the lithium -- brine lithium that we get no longer comes from Argentina or Chile. Most of them are lithium ore and compared to Salt Lake lithium the material cost is much higher.

So I believe that the lithium price will not go beyond below $10,000 and I think that in order to maintain the yield it's going to be around $20,000 that is going to be the price range going forward and that is the industry consensus at the moment thank you..

Yes. I am [indiscernible] from International Trade Affairs Office. So the question was the US-EU and GSSA or Global Sustainable Steel Agreement. And if there is an agreement, EU CBAM and also Section 23, how will they be affected? That's the question, I guess.

Well, If you look at the media reports, I think that it was last Friday, the executive council and also President Biden also had a summit meeting. And in that meeting, they had a conversation about GSSA. And we expected that there was going to be a conclusive agreement from that meeting.

However, if you look at the joint statement that was produced, you can see that although there has been extensive progress, there needs to be additional discussion. So they're going to take two months' time in order to make some more discussion and sometime next year, early next year, they're going to announce the conclusion.

So October onwards, the 25 tariffs on the sale is going to stay as is.

So EU and the US, if they agree on the GSSA, then I think that POSCO and other Korean steelmakers, if they are to export to the U.S., then I think that the export tariffs projection is that depending on the GSSA agreement between the EU and U.S., I think that our tariff is going to be decided as well.

And GSSA and also EU CBAM, I think that the individual companies will be significantly affected and so from going onwards we are going to try to get information also, have a common front together with other peer companies. And the Korean government is also very attentive about this issue as well.

And I think that it is having an active discussion with the U.S. Thank you..

Yes, with regard to the labor union, I would like to provide you with some updates. As you probably know already, October 2nd, the labor union decided that they could not agree on the collective agreement. And also, they've asked for a mediation to a government authority. And as a result, we had a two-round meeting convened by the labor committee.

We attended the meeting and the mediation period was altogether about 10 days and we actually extended that to 10 more days. So by 30th of October, we are going to have a final mediation meeting. So [indiscernible] 28th and 29th, they will be having a vote to decide whether or not they're going to go on a strike.

So, 28th and 29th of October, the labor union will get their vote results and if the majority vote agrees to strike and if the mediation meeting breaks down, then it is possible that they could have a legal labor strike.

But as you probably all know, POSCO and the labor union, since the foundation of the company has built a very constructive relationship and so far we have never had a labor strike. So this time around I think that our employees will pull their collective wisdom to come up with a solution.

And, of course, the management is going to make all our efforts so that we can come up with a reasonable compromise. Thank you..

Next question will be from Mr. [indiscernible] of NH Investment and Securities. Please go ahead..

Hi, I am [indiscernible] of NH Investment and Securities. I have two questions. The first question is a following. So it is related to the increase in the shareholders' equity. So as for the shareholders' equity right now, so it is a little over 20% in terms of the value.

So I was wondering, is this a bit too large? So do you have any plans for extinguishment of those stops? And secondly, with regards to the [indiscernible] lithium solution, once it starts its operation, then as for the raw materials, when those are being purchased and when the finished goods, the lithium oxide is being sold, what will be the benchmark index that you will be using? And when you are purchasing the raw materials or when you are selling your products, what will be the point where you are referencing those benchmarks? So which time point of the benchmark are you going to be using for those indices? And last question.

And as for the Argentinian [indiscernible], it has been carried out.

And what is the cash cost that you have in mind at POSCO?.

So you asked about the shareholders' equity. So Ms. Han Young-Ah from the IR team will be answering. And as for lithium and Argentina operation, Mr. Lee Kyung-seop, the head of lithium battery materials business will be answering..

So as of the total numbers of shares issued, we have 10.3% being captive. And we had the convertible bonds that we issued before and that is under the Korean Securities Institution and that is around 3.8%. So it is actually less than 7% in terms of the stocks that can actually be used. And we actually extinguished 3% last year.

And we actually made some shareholders' recovery last year, I mean, in the previous years as well, and we can make additional considerations. However, with regards to the extinguishment of additional treasury stocks, we don't have anything in plan.

And when we have additional finances later on, then we will consider our financial situations and be able to report to you..

And I'll add about the lithium part. As for lithium, In terms of sales, when you look at the recent trade, it's all based on the fiscal markets. And also the raw material is based on the fast market as well.

However, when we have long-term purchase and contract, then we also use other, like Asian metal, Shanghai metal, or [PLATS] (ph), and then other benchmark indices that we are mixing. So we mix around five different benchmark indices and we will use the mean or the median depending on the trading partner.

And as for the market price, the one that is reflected the most well is the fast market. So the spot trading is mostly done in this market. And as for the time point, as for the PPLS, for the ship, we will get an average of those and then we will use it as a formula for the benchmark price.

And as for lithium sales, we use the average price from the previous month on a general basis. And that is what is on the contract for PPLS at the moment. And as for PPLS, with Pilbara, we have completed the raw material purchase contract and we already have 5,200 tons in Gwangyang plant already to prepare for operation.

So we have already finished with the agreement. And as for Argentina and the cash cost there, we have actually made some comparisons and it's a bit difficult to tell you the exact value now, but we are at the topmost tier. And that'll be all..

Next question is from [indiscernible] from [indiscernible] Security.

You have the floor?.

Yes, thank you very much. My name is [indiscernible]. I have two questions. First question is this.

Now, on the value day, you talked about the lithium price is going to be around $30,000 and based on that you talked about EBITDA and also revenue projections, now if that is the case if our lithium prices -- lithium prices actually went down $25,000 and also $20,000 if that is the case I think that Salt Lake and also [indiscernible].

What would be the margin per raw material and other than the margin per material, what is cash cost like? What are the items on the cash cost? And what are your presumptions or assumptions? And question number two, I understand that you started normal operation of one of your plans.

So what is the cycle and what is the operating margin, operating profit margin at this point?.

Thank you very much. On value day for lithium price, we projected that it's going to be around $25,000 to 2030. Recently, however, with the prices, there is a possibility of a decline by about KRW5,000. Now, with regard to that, for lithium ore, out of the total cost, iron ore takes about 60% to 70%.

So if the lithium price goes down, then the raw material, the biggest item of the raw materials will also go down, so it's highly volatile. So I would like to say that it's not going to affect the profit that much. And when it comes to Salt Lake, the raw -- other than the pumping cost, there are not that many variable costs.

So other than that pumping cost, rather the Salt Lake cost, again, not other cost items are significant. But for long-term projection, OP, I think that it's not going to be that significant a different from our original projections that we shared on value day.

Of course, short term, this year and next year, yes, I could be fluctuating a little, but the timing of our commercialization is going to be, PPS is going to be completed at the end of this year and it's going to be certified early next year and starting from the second half of next year we will be starting to produce and sell.

In Argentina I think that we will be also starting to sell starting from 2025. So by the time we sell our products, I think that lithium prices will become -- will be back on the normal track..

And as for your [indiscernible] question. I think that last May we started our operation.

At this point in time, certification-wise, the Korean government actually grants certification and we have some raw materials that related companies getting the certifications and the targets for us is that by the end of this year we do normal operations and qualify for all the quality standards so that by first half of next year we complete all certification process so that in the second half of next year we can start rolling out certified quality level products.

What's positive at this point in time is that we are trying to align ourselves with the yield target. Now the recovery rate I believe is quite good for lithium. Our target was about 85% recovery. However, last month it reached up to 93%. That's for lithium. So technology-wise, I think that we see results that is greater than our expectations.

So yes, we are going to get this certification by early next year and start producing, starting from the letter of next year..

Next question will be [indiscernible] Securities. Please go ahead..

So hello, I'm [indiscernible] Securities. I have two questions.

First, as said before, interest as for POSCO [indiscernible] completion, even when you do consider it and it takes around six months to one year for the end of the certification, then as for POSCO [indiscernible] what is the utilization rate that you're expecting for next year and when you look at the entire lithium business what is the profit guidance that you have in mind so if you could let us know that will be very helpful.

And secondly as for the lithium business and as for the nickel, do we also need battery certification? And as for the lithium business, and in the same manner, do we have to go through a six month to a 12 month certification? Is there a commodity that requires that long in terms of certification.

And also with the EV steel plate, how much of the EV motor core can we produce with the electrical steel? And also, can we actually sell it as something that we can use for the EV motor core..

With regards to PPLS, let me provide an answer to it. So in the previous IR and in our Value Day, we talked about the following. So as for ramp up period, we thought we are targeting around 12 months. And in TRUCE, the internal target is the following.

So as for the ramp up period, we are trying to pull it in to around nine months, so we are hoping to accelerate that period. And if we can be fast, then as for PPLS, we're expecting in the second half of next year or the third quarter, we can actually target normal operation.

As for the certification for lithium in the precursor, we add the lithium there. And therefore, for the cathode company and the battery company, we need certification both for both. And right now, Future M already has the cathode business being certified in there. So therefore, we believe that we will be able to shorten the certification period.

Normally, certification takes around nine months to 12 months, but with Future M and with the battery company, we have talked and discussed that we can target around six months of the certification period. And that is the discussions that we carried out.

And as for the lithium businesses, import guidance and the profit guidance, we are trying to ramp it up within six to nine months. And afterwards, if we can sell it at a normal level, that is something that we have in target. And as for lithium and as for PPLS, in advance, even without certification.

As for the lithium electrolyzer material and et cetera, we are trying to cooperate with those companies so that we can sell our [indiscernible]. So we are already focusing on the marketing activities that we can do before we get the certification and that has been somewhat completed.

Regarding the kill, the certification process is a bit different from that of lithium. So this is 1 that goes into a precursor. And in [indiscernible], if we get a certification from the cathode company, then that would be the end.

However, in most cases, battery companies, when we are dealing with a new factory, we go through another short form of the certification process. And with regards to electrical, steel, and EV motor core, I think Mr. [indiscernible] group leader of the marketing strategy, would be able to answer that..

So I think you asked about the number of the EV motor cores per ton. Usually in 65 kilograms, it will be around 15 units being made. And as for detailed data, the IR team will be sending you the details..

Next question is from [indiscernible] from BBS. Please go ahead..

Yes, thank you very much for the opportunity. I have two questions. Basically, Q4, what is your projection for your earnings? And next year, I think that there are a lot of uncertainties. So what is your business performance outlook for next year? I would like to ask the overall profitability projection. And second has to do with nickel profitability.

I think that on the Value Day there was a presentation made and based on that I think that with regard to nickel there were three big investment related items. You talked about Indonesia and second precursor in Korea, the nickel refinery, I guess. I think that it's nickel surfate or precursor and also Indonesia MHP.

So these projects, are these still ongoing? That's my question. The reason why I ask is because the Indonesian government recently, because of nickel prices, decided that it's not going to grant any new projects. So that was released as news to report.

And also, nickel project, I understand that in September you've launched the project already and I understand that POSCO Holdings has 49% of the stakes and the other partner has 51% stakes. I would like to ask who your Indonesian partner is, who your JV partner is. I think it's something that you can provide us.

And also, what is the cash cost? So these are some of the questions related to your nickel projects. Thank you..

Thank you very much. I'm the head of marketing strategy office. You talked about Q4 outcome. Well, as I mentioned earlier, Q4 market outlook is not that positive. I think that it's going to be more or less stay weak in continuation of Q3 results.

So basically, with regard to our sales strategies, we're going to focus on shipbuilding and also auto making industries where the business outlook is quite positive. So we'll be focusing on those for ourselves. And as I mentioned earlier, we are going to focus on cost-cutting efforts as well internally so we can maintain high profitability.

And domestic demand is not that good so we will be focusing on exports. Of course, export prices are still low but we're going to focus on changing our sales mix and try to sell more high value added products in order to maintain profitability. And the second question has to do with 2024 market projection.

Well, recently, I think that in October at WSE, there was a global steel market projection and the outlook was that it's going to grow by about 2.9%, which is quite similar to 2023. But in Korea, it's going to be around 1.1%. So compared to 3.3% of this year, I think that it's going to slow down even further next year.

And China, I think that it's going to be staying flat. So Q1, 2024, until then, I think that Q4 market outlook, that weakness is going to continue. And if you look at SNS and Russian Putin-related issues are coming up. So again, the Ukraine and Russia war and the recent Israel and Palestine war.

And we also have a high interest rate and also high oil price issues. So because of all these mixed factors, I think that we have to wait until Q1 next year to get some clear understanding about the 2024 market projection. Thank you..

I'd like to comment on nickel. I think that as I mentioned earlier, Nicole met, I think that we got all the permissions and we have broken ground and we are building currently really fast and also MHP business. In Indonesia we didn't have any issues regarding approval and permission.

And with regard to [indiscernible] cash call, I find it difficult to share with you the concrete numbers. But when it comes to cost analysis, compared to our competition, I think that we are producing [indiscernible] at a very low price. It's like $1,000 cheaper compared to our competition. So we believe our product will be very competitive.

And with regard to JV partner, I think that we will be able to disclose the name of the JV partner at an appropriate time in the future. Thank you..

We will take the last question. And last question will be coming from Ms. [indiscernible] Investment and Securities. Please go ahead..

So Hello, I'm [indiscernible] Investment and Securities. I have a question about Argentina. Since we are at 4,000 meters sea level, I heard that there are some costs associated with it, so I was wondering about the transportation costs.

Since we don't know about the road situation in Argentina, I was wondering what you're doing with your transportation costs and what is the expected cost of transportation in Argentina. And secondly, you said you also have a lot of the long-term contracts as well.

So could you give some ideas about the spot prices in terms of those long-term prices as well and what would be the focus on the nickel prices as well?.

So actually as for the shipping and the transportation cost and as for the logistics route, we are working with another POSCO subsidiary, so we're trying to develop the optimal route for transportation. There are two ways to go from high altitude. 1 is to go straight from Chile. There is the way of also going through Buenos Aires of Argentina by ship.

When you are in the ocean, as for the transportation cost, it is really not that different from the previous transportation cost using ships.

But when you're going from the high altitude to the marine areas, so when you're going from the Salt Lake to Chile and to Buenos Aires, when we calculated the transportation cost, it's quite rough, but it was slightly over $300. But as for the accurate number, we are still in the process of calculation.

But still, as compared to the actual lithium price, the transportation cost is not too burdensome. And as for the long-term contract for lithium, before 2019, we used to have five to 10 year deep discount to a long-term contract. But since 2020, as we're the existing lithium business owners, we don't take it for too long.

Some we will sell at spot and some we have around three to five year contracts. And as for us, our plan is the following. And together with our group company Future M we're going to prioritize supply, so we're going to prioritize the volume that we need first. And generally, we can have a contract that goes even more than 10 years if necessary.

So we are right now in the preparation of making the contract. So if possible, we want to have more than 70% of the volume as a long-term contract that lasts more than five years or 10 years. And only some we will have spot contracts and be responding to the market in terms of the market condition. And as for the price of nickel, it's around $18.3K.

And until second quarter, the price of nickel, actually it's for nickel sulfite, until last year we had around $2,000 premium. But at the first half this year in China, with regards to nickel certified, there was a supply. Therefore, it went to a negative value. But in October, As for the price of nickel sulfide, we are seeing a plus $1,000 premium.

And as for nickel in EV, we are seeing a stable position. But for the current price, the long-term projection that we have was $20,000, but as for until 2025 to 2026, we are expecting it to be around $19,000, and that is the forecast in the market..

So we would like to thank all the participants who have joined us today. So we have faced some economic difficulties. However, POSCO is focusing on long-term growth strategies without faltering. And now we will conclude the 2023 Third Quarter Earnings Release Conference Call. Thank you..